According to the National Center for Health Statistics, there were 813,862 divorces in 2016. While divorce may be common, it doesn’t make the process any easier. Divorce is stressful, but proper preparation and financially preparing for divorce can help ease the situation.
Getting ready for a divorce is multi-faceted. Not only do you need to prepare mentally and emotionally, but also financially.
Divorce isn’t an easy situation for either party, but preparing yourself financially for the divorce can save you from future money issues.
Being ready financially can help minimize financial issues during the divorce proceedings. In the event of alimony or child support issues, you’ll want to be financially prepared.
Here are 7 tips to get you on the right path:
7 Tips For Financially Preparing For Divorce
1. Inventory Your Assets
Assets can be sticklers during divorce cases. Who gets the house and car? Who keeps the wedding rings?
One of the first steps is to take an inventory of all of your assets.
You’ll first want to take note of separate property. This includes anything that you owned before your marriage. Separate property also includes inheritances and gifts.
Items acquired during the marriage are considered marital property. Who gets which items is often determined in court.
When taking your inventory, be sure to:
- Create a typed list of inventoried items
- Take pictures of each item, with a time stamp
- Upload these picture to avoid data loss
Knowing which assets you have is important. You want to be able to account for all items so that you have what is rightfully yours once the divorce is finalized.
2. Locate and Store Your Financial Records
Having your financial records available during a divorce can make the process much faster. Once you and your ex-partner have decided to move forward with a divorce, ensure you have access to your financial records.
You should have at least five years’ worth of documents. The further back your documents date, the better.
When collecting financial records, be sure that you have:
- Bank statements
- Benefits and beneficiary information
- Property information
- Investment accounts
- Tax returns
- Pay stubs
Once you have located these documents, make copies of each one. You will want to keep the originals in a safe location, such as a deposit box.
3. Open Individual Accounts
Many married couples have joint bank accounts. If you have automatic deposits into a joint account, you’ll want to stop them immediately.
You will also want to remove your ex-partner’s name from any of your accounts. This will ensure that only you have access to them.
As soon as you know that the divorce will proceed, open your own personal accounts. You may want to use an entirely new bank as well, to avoid potential confusion.
Open a checking as well as a savings account in just your name.
Want to build your personal credit? Open a credit card with a small line of credit. This will allow you to strengthen your credit history.
4. Create a New Budget
Unless you and your ex-partner will maintain the financial status quo, your household income will decrease. Living on just one salary can be eye-opening.
Another piece of financially preparing for a divorce is to create a new budget.
When creating your budget:
- Write down your monthly income
- Notate your monthly bills
- Account for money sent to retirement and/or savings accounts
After crunching the numbers, ensure that you are able to cover your expenses. If you are coming up short, now is the time to cut expenses where possible.
You will also want to work on building your emergency fund. Divorce attorneys and court fees can be expensive. Ensure you are financially sound enough to cover any divorce-related costs.
5. Update Beneficiaries
Updating your beneficiaries is an important part of financially preparing for divorce. It is so easy to forget about a beneficiary form that you filled out years ago.
During a divorce, you will want to remove your ex-partners name as the listed beneficiary. You may find it ideal to list your parent or a close family member instead.
When updating your beneficiaries, you may have to do so in several locations, including:
- Insurance policies
- Retirement accounts
- Your will
- Medical proxy
6. Keep an Eye on Your Credit Report
Your credit report will give you a clear picture of your current financial position. With your credit report, you will want to notate any outstanding debts. Also, take note of your credit score.
Also, take note of your credit score.
Are you a cosigner for your partner’s loan? Do you both have access to a credit card with an unpaid balance?
These could be potential issues during the divorce. Your ex-partner could decide to run up the credit card even more. This makes for a messy financial situation.
Be aware of your debts and carefully monitor them throughout the divorce.
There’s nothing worse than a dropping credit score because of your ex-partner. Keep tabs on your debt amounts and ensure they don’t increase.
7. Financially Preparing for Divorce With a Financial Adviser
Chances are that you and your ex-partner shared financial responsibilities. With the potential of only one income now, it’s important to get a big picture of your finances.
Will you be able to pay all of your bills? Can you live comfortably on your salary alone?
A financial adviser can help determine your financial situation.
Meeting with a financial adviser is useful for financially preparing for divorce. An adviser will be able to assist you with:
- Determining your monthly income
- Creating a new budget
- Finding potential income shortfalls
- Ensuring your financial success during the divorce
- Current and future tax situation
A Family Law Attorney You Can Depend On
The idea of a divorce is stressful enough. Going through a divorce on your own can make the process that much harder.
Want a quick and easy divorce? If so, you’ll want legal help and representation.
A qualified family law attorney can work with you to make the process much easier.
At the Law Offices of Gerard A. Falzone, we specialize in divorce cases. You can count on us to get you through this difficult process. Contact us today to get started.